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An SEC investigation found that Oppenheimer Asset Management and Oppenheimer Alternative Investment Management disseminated misleading quarterly reports and marketing materials stating that the fund’s holdings of other private equity funds were valued “based on the underlying managers’ estimated values.” However, the portfolio manager of the Oppenheimer fund actually valued the fund’s largest investment at a significant markup to the underlying manager’s estimated value, a change that made the fund’s performance appear significantly better as measured by its internal rate of return.

According to the SEC’s order, OGR’s largest investment — Cartesian Investors-A LLC — was not valued based on the underlying managers’ estimated values. OGR’s portfolio manager himself valued Cartesian at a significant markup to the underlying manager’s estimated value. OAM’s change in valuation methodology resulted in a material increase in OGR’s performance as measured by its internal rate of return, which is a metric commonly used to compare the profitability of various investments. For the quarter ended June 30, 2009, the portfolio manager’s markup of OGR’s Cartesian investment increased the internal rate of return from approximately 3.8 to 38.3 percent.